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Law360, Wilmington (February 1, 2017, 8:13 PM EST) -- A Chapter 11 trustee for Molycorp Minerals LLC sought Delaware bankruptcy court approval late Tuesday to pursue a minimum sale of $40 million for the company’s California rare earth mine, less than a year after officials discussed abandoning the site.
Trustee Paul E. Harner of Ballard Spahr LLC said the proposed March bidding plan, to be led by a $40 million “stalking horse” offer, followed a months-long effort by Batuta Capital Advisors LLP to market the mine and solicit potential buyers
The idled mine, in San Bernardino County in southeastern California, was spun off into its own Chapter 11 from parent company Molycorp Inc. last year as part of that company's bankruptcy restructuring. Molycorp Inc.’s rare earth processing facilities survived as new names and new companies, but the shuttered mine was left to an uncertain future with limited funds.
“There potentially is substantial value to be unlocked in the Mountain Pass mine assets,” Harner said in an earlier court motion seeking retention of Batuta, a financial adviser with specialties that included distressed companies.
Supporting the sale, Harner said at the time, is “the relatively recent investment of more than $1.5 billion in converting the facility to a state-of-the-art rare earth minerals mining and processing plant, and especially if a ‘turnkey’ buyer for the facility can be identified.”
The trustee’s motion said Rare Earth Global Partners, a business to be formed for the purchase, would acquire the mine and some of its associated assets unless outbid by another party. Plans call for filing of Rare Earth’s executed purchase agreement by Feb. 24, with competing bids due by March 17 and an auction if warranted on March 22. A sale hearing would follow on March 30.
Under the sale proposal, the winning bidder would acquire the mine site, its mineral rights and other assets as well as Molycorp Minerals’ Chapter 11 obligations and environmental cleanup responsibilities. Rare Earth would receive a 4.5 percent, or $1.8 million, breakup or termination fee if another party submits a higher, winning bid.
Harner's motion provided no details about Rare Earth.
At the time of Molycorp Inc.'s tentative Chapter 11 approval in April, an attorney for the company's Ad Hoc Committee of Senior Noteholders reported that a foreign entity made an initial bid for the entire mine but did not pursue the acquisition when Molycorp Inc. itself attempt to sell the site.
The noteholder group purchased a large share of the mine site’s underground mineral assets, including some on nearby public lands, in exchange for a for $1 million reduction in a more than $680 million noteholder claim. At the time, a committee attorney said there had been communications with the same foreign party on a possible role in developing the newly acquired mineral rights, but did not elaborate or identify the nation involved.
Oaktree Capital Management LP, Molycorp Inc.’s lender before and after the Chapter 11 began, also retained a substantial interest in the mine and mineral-related assets.
Harner at one point recommended dismissing the entire case from Chapter 11, a move that could have left the property in the hands of San Bernardino County, the Environmental Protection Agency and insurers who issued policies guaranteeing the site's safe management and cleanup.
Rare earth minerals are used in a range of high-tech industries and products, including smartphones and systems for satellites and fighter jets. Mountain Pass has long ranked as North America’s largest developed source, but the mine shut down in August after failing to reach production goals despite $1.7 billion worth of investment.
China now provides more than 90 percent of the world’s rare earth consumption.
County, state and federal agencies have closely followed the mine’s status, citing concerns about contaminated runoff and dust and the possibility that costs would fall to taxpayers if the mine is abandoned.
Molycorp Minerals LLC’s trustee is represented by Vincent J. Marriott III of Ballard Spahr LLP.
